The U.S. Department of Energy Retreats on Natural Gas Efficiency - but Temporary Setback Could Set the Stage for Higher Standards

The U.S. Department of Energy (DOE) has just retreated on important new energy efficiency standards for natural gas furnaces that were scheduled to go into effect in May and would have saved Americans an estimated $10.7 billion in lower heating bills over the next three decades.

By undoing these standards that were supported by manufacturers, consumers and efficiency advocates, states, and many utilities, American households are destined to waste more natural gas and money. In terms of energy, these standards would have saved 31 billion therms of natural gas over the next 30 years - enough to heat 62 million typical U.S. homes for a year. And the standards would have avoided the emission of somewhere between 81 to 130 million metric tons of global warming carbon pollution over the next three decades – that’s equivalent to the pollution generated by thirty or so coal-fired power plants.

Energy efficiency standards require our appliances and heating and cooling systems to operate efficiently while still providing the same or greater level of performance and comfort. DOE’s appliance efficiency program has a long record of success. Unfortunately, sometimes we encounter a setback, which is what happened Friday with the Department of Energy’s action in an ongoing lawsuit. In a motion filed in a legal challenge, DOE asked the court to “vacate” – or undo – these furnace efficiency standards, so that it can go back to the drawing board and redo them from scratch.

Importantly, consumer and low-income consumer groups agree that this is a setback.  “The Department of Energy’s retreat from long overdue natural gas furnace efficiency standards is bad news for consumers. Strong efficiency standards reduce winter heating bills, helping all families but especially those who have the least means to stay warm and save money,” according to National Consumer Law Center attorney Olivia Wein.

DOE couldn’t have chosen a worse moment to turn the clock back on natural gas efficiency. Just last week, the U.S. National Oceanic and Atmospheric Administration affirmed that 2012 was the hottest year ever in the continental United States, and the destructive impacts of global warming on communities and public health keep adding up, especially in light of Superstorm Sandy. Moreover, concerns over the environmental and public health risks of under-regulated fracking continue to multiply. If DOE succeeds in undoing these standards, it needs to sets things right quickly by setting new furnace efficiency standards at the same or stronger levels. 

Here’s the story. Back in 2010, NRDC worked with consumer groups, states, utilities and manufacturers to negotiate consensus energy efficiency standards for furnaces which we jointly recommended to DOE. The agency then adopted them in 2011. These standards were regional: in the northern part of the United States, where winters are harsher and heating bills higher, the standards would have required that gas furnaces operate at 90% or higher efficiency – meaning that at least 90% of the natural gas burned would go to heating, rather than being wasted.  Today’s furnaces are only required to have an average efficiency of 80%, although there is already a high penetration of 90% efficient furnaces in the Northeast. So these standards were a substantial, but reasonable, advance in efficiency. 

Last year, the American Public Gas Association, a small trade group of public natural gas utilities, filed a legal challenge to the consensus furnace standards in the U.S. Court of Appeals for the D.C. Circuit. APGA’s motivation was clearly the potential loss of market share and revenues that these gas efficiency standards represented. APGA’s position was in no way representative of natural gas utilities as a whole. Indeed, the American Gas Association – the much larger organization which represents investor-owned natural gas utilities across the United States – did not join in challenging the standards and worked with NRDC and efficiency advocates to chart a path toward their smooth implementation. And many natural gas utilities – including National Grid and Nstar – have strongly supported these standards.

Because of their importance to consumers and the environment, NRDC -- together with consumer groups and other efficiency advocates -- became parties to this challenge in order to support DOE and the standards. The Commonwealth of Massachusetts, State of New York and California Energy Commission also filed a legal brief in support. 

Unfortunately, after initially defending against the lawsuit and filing a strong legal brief in support of the standards, on Friday DOE chose to wave the white flag and settle the challenge, apparently over concerns about the process that DOE used to adopt the rule, not the substance of the standards themselves. DOE filed a motion asking that the court undo the new standards just months before they were to go into effect. NRDC is reviewing the court papers and our legal options.

So where do things stand now on furnace efficiency standards? Clearly, there’s damage done. 

First, new, stronger efficiency standards are long overdue. Congress first established furnace efficiency standards in 1987, and directed DOE to strengthen these standards twice – first by 1994, and second by 2007.  Yet today, despite several botched efforts by DOE, furnace efficiency standards are still at much the same level as they were back in 1987. Any new furnace efficiency standards issued by DOE through a new rulemaking would likely not go into effect until sometime after 2020, and this delay will significantly reduce consumer, energy and environmental benefits.  

Second, NRDC has been participating in energy efficiency standard negotiations with manufacturers, efficiency advocates, consumer groups and states for decades.  Negotiated rulemakings are one of the most important pathways for improved efficiency benchmarks and about one-third of DOE energy efficiency standards have been based upon such agreements. DOE’s support is critical to this process and the agency’s recent actions in this lawsuit could have a chilling effect on further negotiated standards.

But there is a path forward on furnace efficiency.  While this setback will delay efficiency gains, inevitably stronger efficiency standards for furnaces will become a reality in the future.  DOE has stated that it will begin a new rulemaking process to develop furnace efficiency standards. This will give NRDC and the many other stakeholders who support efficiency standards an opportunity to advocate for the strongest possible technically feasible and cost effective efficiency standards, which could well be stronger than the ones that DOE abandoned last week.  


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